second quarter 2026
Filed Aug 5, 2026alphai · Earnings readWTS · second quarter 2026 · ended June 28, 2026
WATTS WATER TECHNOLOGIES REPORTS RECORD SECOND QUARTER 2026 RESULTS
✓Strong quarter
Net sales increased 19%, organic sales growth was 12%, operating income increased 14%, and diluted earnings per share increased 17%. The Company increased its full year 2026 sales, organic sales growth, operating margin, and adjusted operating margin outlook.
Revenue
$763.2 million
19% y/y
Americas
$585 million
17% on a reported basis y/y
Operating margin · GAAP
20.2%
(80) bps y/y
EPS · non-GAAP
$3.66
18% y/y
Full Year 2026 outlook
up 14% to up 17% on a reported basis
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net salesGAAP | $763.2 million | – | 19% |
| Organic sales growthnon-GAAP | 12% | – | 12% |
| Operating incomeGAAP | $154.0 million | – | 14% |
| Operating marginGAAP | 20.2% | – | (80) bps |
| Adjusted operating incomenon-GAAP | $160.0 million | – | 15% |
| Adjusted operating marginnon-GAAP | 21.0% | – | (60) bps |
| Diluted earnings per shareGAAP | $3.53 | – | 17% |
| Special itemsnon-GAAP | 0.13 | – | – |
| Adjusted diluted earnings per sharenon-GAAP | $3.66 | – | 18% |
| Operating cash flow for the first six months of 2026GAAP | $121 million | – | – |
| Net capital expenditure for the first six months of 2026other | $23 million | – | – |
| Free cash flow for the first six months of 2026non-GAAP | $98 million | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| AmericasSales increased 12% on an organic basis, primarily due to favorable price realization and higher volume driven by data center growth. Acquisition sales contributed $28 million, or 6%, to reported sales growth. | $585 million | – | 17% on a reported basis |
| EuropeSales increased 9% on an organic basis, primarily due to higher volumes and favorable price realization. Favorable foreign exchange contributed 3% to reported sales growth. | $125 million | – | 12% on a reported basis |
| APMEASales increased 31% on an organic basis. Organic growth was primarily due to higher volume driven by data center growth in China partly offset by a decline in the Middle East. Acquisition sales contributed $6 million, or 17%, and favorable foreign exchange contributed 9% to reported sales growth. | $54 million | – | 57% on a reported basis |
Full Year 2026 outlook
- Revenueup 14% to up 17% on a reported basis
- NoteOrganic sales growth: up 8% to up 11% on an organic basis
- NoteOperating margin: between 19.4% and 20.0%, or up 100 basis points to up 160 basis points
- NoteAdjusted operating margin: between 19.8% and 20.4%, or up 20 basis points to up 80 basis points
- NoteThe full year outlook assumes no change in the level of impact resulting from the Middle East conflict and incorporates the estimated impact of tariffs in place or announced as of August 4, 2026.
- NoteThe full year outlook does not include the impact of tariff refunds.
Capital returns
- The Company repurchased approximately 13,000 shares of Class A common stock at a cost of $4.1 million during the second quarter of 2026.
- Approximately $121 million remains available under the stock repurchase program authorized in 2023.
- There is no expiration date for this program.
What drove it
- Company sales increased primarily due to favorable price realization and higher volume driven by data center growth.
- Acquisition sales within the Americas and APMEA contributed $34 million, or 5%, to reported sales growth.
- Favorable foreign exchange contributed $7 million, or 1%, to reported sales growth.
- Europe segment margin increased 160 basis points primarily due to favorable price realization, sales volume leverage, and productivity, which more than offset higher inflation.
- APMEA segment margin increased 100 basis points primarily due to favorable price realization and acquisition accretion, which more than offset inflation and cost headwinds from the Middle East conflict.
Concerns
- Operating margin decreased 80 basis points and adjusted operating margin decreased 60 basis points.
- Operating and adjusted operating margin decreased primarily due to acquisition dilution, inflation and tariffs, and the difficult comparison against the one-time tariff-related price/cost benefit in the prior year.
- Americas segment margin decreased 150 basis points primarily due to acquisition dilution, inflation and tariffs, and the difficult comparison against the one-time tariff-related price/cost benefit in the prior year.
- APMEA organic growth was partly offset by a decline in the Middle East.
- The full year outlook assumes no change in the level of impact resulting from the Middle East conflict.
- The full year outlook does not include the impact of tariff refunds.
What to watch
- Sales growth and volume contribution from data center growth.
- Margin effects from acquisition dilution, inflation, tariffs, price realization, sales volume leverage, and productivity.
- The expected sequential increase in free cash flow in the second half of 2026.
- Working capital monetization, including accounts receivable and inventory levels.
- The level of impact resulting from the Middle East conflict and tariffs in place or announced as of August 4, 2026.
Balance sheet and cash flow
- For the first six months of 2026, operating cash flow was $121 million and net capital expenditure was $23 million, resulting in free cash flow of $98 million.
- In the comparable period last year, operating cash flow was $125 million and net capital expenditure was $20 million, resulting in free cash flow of $105 million.
- Free cash flow declined due to higher working capital levels and increased capital expenditures, which more than offset higher net income.
- Working capital increases were due to higher accounts receivable attributable to higher net sales, higher inventory due to incremental tariffs and strategic inventory investments to support expected end-market demand.
- Sequential increases in free cash flow are expected in the second half of 2026 as we monetize working capital with the seasonality of the business.
Analysis
Watts reported record second quarter 2026 net sales of $763.2 million, up 19%, with 12% organic sales growth. The release attributed growth primarily to favorable price realization and higher volume driven by data center growth. Acquisitions contributed $34 million, or 5%, to reported sales growth, while favorable foreign exchange contributed $7 million, or 1%. Operating income increased 14% to $154.0 million and diluted earnings per share increased 17% to $3.53.
Management, verbatim
We delivered another strong quarter, achieving record sales, operating income and EPS, with double-digit organic growth.
Robert J. Pagano Jr., Chief Executive Officer
Building on our first half performance, we are increasing our full year 2026 sales and margin outlook.
Robert J. Pagano Jr., Chief Executive Officer
This includes attractive markets such as data centers, where our differentiated capabilities continue to drive strong customer demand and where we see significant opportunity ahead.
Robert J. Pagano Jr., Chief Executive Officer
Not in the filing
stated, not guessed- GAAP net income
- Gross profit
- Gross margin
- Segment operating income
- Actual segment margin percentages
- Prior-quarter comparisons for reported financial metrics
- Second-quarter operating cash flow
- Second-quarter capital expenditures
- Second-quarter free cash flow
- Cash balance
- Debt balance
- Dividend amount or dividend declaration
- Effective tax rate
- Full year 2026 gross margin guidance
- Full year 2026 operating expenses guidance
- Full year 2026 tax rate guidance
- Full year 2026 earnings per share guidance
- Previous outlook for comparison
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.